Tariff pause rally: S&P +5.7% on week after Liberation Day shock

The week of April 7-11 2025 was defined by extreme volatility and a historic reversal. The week opened with continued Liberation Day fallout: Monday April 7 saw the S&P 500 fall 3.7% after reopening, extending the prior week's 12% drop. The S&P 500 tested 4835 (-23% from the February peak), entering official bear market territory. Emerging market currencies weakened sharply. Chinese equities faced retaliation threats.

Wednesday April 9 delivered the reversal. At 1:18 PM Trump posted on Truth Social announcing a 90-day pause on reciprocal tariffs (excluding China) pending negotiations. The S&P 500 surged from -1.8% to +9.5% on the day, the largest single-session gain since October 2008. VIX compressed from 57 to 33 intraday. Trading volume exceeded 30B shares, the highest since March 2020. Short-covering and systematic strategy re-entry dominated the flow.

The balance of the week saw partial consolidation. Thursday gave back 3.5% as China retaliation concerns persisted and specifics of the pause remained unclear. Friday recovered 1.8%. The week closed at 5363, up 5.7%. Cross-asset performance was violent: the 10Y yield whipsawed from 4.0% to 4.5% and back, gold hit new highs above $3,250, and Bitcoin fell below $80,000 on correlated risk-off before partially recovering. The week established that tariff policy was the dominant macro variable and that policy reversals could be priced faster than announcements.